Marathon Oil (MRO)

26. Leases

We lease a wide variety of facilities and equipment under operating leases, including land and building space, office equipment, production facilities and transportation equipment. Most long-term leases include renewal options and, in certain leases, purchase options. Future minimum commitments for capital lease obligations (including sale-leasebacks accounted for as financings) and for operating lease obligations having initial or remaining noncancelable lease terms in excess of one year are as follows:

In connection with past sales of various plants and operations, we assigned and the purchasers assumed certain leases of major equipment used in the divested plants and operations of United States Steel. In the event of a default by any of the purchasers, United States Steel has assumed these obligations; however, we remain primarily obligated for payments under these leases. Minimum lease payments under these operating lease obligations of $21 million have been included above and an equal amount has been reported as sublease rentals.

Of the $459 million present value of net minimum capital lease payments, $69 million was related to obligations assumed by United States Steel under the Financial Matters Agreement.

116

Table of Contents

Index to Financial Statements

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements

Operating lease rental expense was:

26. Leases

We lease a wide variety of facilities and equipment under operating leases, including land and building space, office equipment, production facilities and transportation equipment. Most long-term leases include renewal options and, in certain leases, purchase options. Future minimum commitments for capital lease obligations (including sale-leasebacks accounted for as financings) and for operating lease obligations having initial or remaining noncancelable lease terms in excess of one year are as follows:

In connection with past sales of various plants and operations, we assigned and the purchasers assumed certain leases of major equipment used in the divested plants and operations of United States Steel. In the event of a default by any of the purchasers, United States Steel has assumed these obligations; however, we remain primarily obligated for payments under these leases. Minimum lease payments under these operating lease obligations of $21 million have been included above and an equal amount has been reported as sublease rentals.

Of the $459 million present value of net minimum capital lease payments, $69 million was related to obligations assumed by United States Steel under the Financial Matters Agreement.

116

Table of Contents

Index to Financial Statements

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements

Operating lease rental expense was:

Leases

2.1 Assumption of Capital and Other Leases. Parent hereby assigns to Steel and Steel assumes all rights and obligations of Parent relating to the leases listed in Schedule 2.1 attached hereto (the “Assumed Leases”) including without limitation, the obligation to pay all sums due under the Assumed Leases. Steel’s obligations with respect to the Assumed Leases shall include payment of amounts due upon any defaults or acceleration of any of the obligations with respect to the Assumed Leases other than defaults caused by Parent.

Page 3

2.2 Contingent Nature of Certain Leases. Certain of the Assumed Leases, as designated in Schedule 2.1, were previously assigned to and assumed by third parties in agreements between such third parties and Old USX (the “Previously Assigned Leases”). Steel assumes and shall discharge all obligations of Old USX relating to the Previously Assigned Leases.

2.3 Rights of Steel. Steel shall have the right to exercise all of the existing contractual rights of Parent concerning the Assumed Leases including all rights relating to purchase options, prepayments or granting or releasing security interests, and Parent shall use commercially reasonable efforts to assist Steel in its exercise of such rights. Notwithstanding the foregoing Steel shall have no right to increase the amounts due under or lengthen the term of any of the Assumed Leases without the prior consent of Parent other than extensions set forth in the terms of any of the Assumed Leases.

2.4 Rights of Parent. Steel shall notify Parent of its decision whether to exercise any purchase option under the Assumed Leases and if Steel elects not to so exercise Parent shall have the right but not the obligation to do so. Parent agrees to use commercially reasonable efforts to comply with all provisions of the Assumed Leases and shall not take any action that would result in a default thereunder.

2.5 Assignment of Leases. Steel shall have the right to assign any of its rights and obligations under the Assumed Leases to any party provided that such assignment shall not release Steel from any of its obligations to Parent relative to such Assumed Leases.

26. Leases

Marathon leases a wide variety of facilities and equipment under operating leases, including land and building space, office equipment, production facilities and transportation equipment. Most long-term leases include renewal options and, in certain leases, purchase options. Future minimum commitments for capital lease obligations (including sale-leasebacks accounted for as financings) and for operating lease obligations having initial or remaining noncancelable lease terms in excess of one year are as follows:

In connection with past sales of various plants and operations, Marathon assigned and the purchasers assumed certain leases of major equipment used in the divested plants and operations of United States Steel. In the event of a default by any of the purchasers, United States Steel has assumed these obligations; however, Marathon remains primarily obligated for payments under these leases. Minimum lease payments under these operating lease obligations of $26 million have been included above and an equal amount has been reported as sublease rentals.

Of the $367 million present value of net minimum capital lease payments, $83 million was related to obligations assumed by United States Steel under the Financial Matters Agreement.

Operating lease rental expense was:

Leases

FACE="Times New Roman" SIZE="2">2.1 Assumption of Capital and Other Leases. Parent hereby assigns to Steel and Steel assumes all rights and obligations of Parent relating to the leases listed in Schedule 2.1 attached hereto (the “Assumed
Leases”) including without limitation, the obligation to pay all sums due under the Assumed Leases. Steel’s obligations with respect to the Assumed Leases shall include payment of amounts due upon any defaults or acceleration of any of the
obligations with respect to the Assumed Leases other than defaults caused by Parent.

Page 3

2.2 Contingent Nature of Certain Leases. Certain of the Assumed Leases, as designated in Schedule
2.1, were previously assigned to and assumed by third parties in agreements between such third parties and Old USX (the “Previously Assigned Leases”). Steel assumes and shall discharge all obligations of Old USX relating to the Previously
Assigned Leases.

2.3 Rights of Steel. Steel shall have the right to exercise all of the existing contractual rights of Parent
concerning the Assumed Leases including all rights relating to purchase options, prepayments or granting or releasing security interests, and Parent shall use commercially reasonable efforts to assist Steel in its exercise of such rights.
Notwithstanding the foregoing Steel shall have no right to increase the amounts due under or lengthen the term of any of the Assumed Leases without the prior consent of Parent other than extensions set forth in the terms of any of the Assumed
Leases.

2.4 Rights of Parent. Steel shall notify Parent of its decision whether to exercise any purchase option under the Assumed
Leases and if Steel elects not to so exercise Parent shall have the right but not the obligation to do so. Parent agrees to use commercially reasonable efforts to comply with all provisions of the Assumed Leases and shall not take any action that
would result in a default thereunder.

2.5 Assignment of Leases. Steel shall have the right to assign any of its rights and
obligations under the Assumed Leases to any party provided that such assignment shall not release Steel from any of its obligations to Parent relative to such Assumed Leases.

ALIGN="center">Article III

27. Leases

Marathon leases a wide variety of facilities and equipment under operating leases, including land and building space, office equipment, production facilities and transportation equipment. Most long-term leases include renewal options and, in certain leases, purchase options. Future minimum commitments for capital lease obligations (including sale-leasebacks accounted for as financings) and for operating lease obligations having remaining noncancelable lease terms in excess of one year are as follows:

        In connection with past sales of various plants and operations, Marathon assigned and the purchasers assumed certain leases of major equipment used in the divested plants and operations of United States Steel. In the event of a default by any of the purchasers, United States Steel has assumed these obligations; however, Marathon remains primarily obligated for payments under these leases. Minimum lease payments under these operating lease obligations of $42 million have been included above and an equal amount has been reported as sublease rentals.

        Of the $166 million present value of net minimum capital lease payments, $122 million was related to obligations assumed by United States Steel under the Financial Matters Agreement. Of the $363 million total minimum operating lease payments, $13 million was assumed by United States Steel under the Financial Matters Agreement.

        During 2003, Marathon purchased two LNG tankers which were previously leased. A $17 million charge was recorded on the termination of the operating leases. These tankers are used to transport LNG from Kenai, Alaska to Tokyo, Japan.

        Operating lease rental expense was:

^(a)

Excludes $11 million, $23 million and $24 million paid by United States Steel in 2004, 2003 and 2002 on assumed leases.